Wells Fargo Bank, N.A. 

Wells Fargo Retirement

MAC D1050-140 

Three Wachovia Center 

401 S. Tryon Street, 14th Floor 

Charlotte, NC 28288-1156 

wellsfargo.com/retirement 

 

February 3, 2011 

Via Email: e-ORI@dol.gov 

Office of Regulations and Interpretations 

Employee Benefits Securities Administration 

Attn: Definition of Fiduciary Proposed Rule, Room N-5655 

U. S. Department of Labor 

200 Constitution Avenue, NW

Washington, DC 20210 

Re: RIN 1210-AB32

Attention: Definition of Fiduciary Proposed Rule 

Dear Ladies and Gentlemen: 

On behalf of all of its affiliates, Wells Fargo & Company (“Wells Fargo”) appreciates the opportunity to 

provide comments to the Department of Labor (the “Department”) on the proposed regulation, published 

on October 22, 2010, which would substantially amend the current and longstanding regulatory 

interpretation of fiduciary status under the Employee Retirement Income Security Act of 1974, as 

amended (“ERISA”). Wells Fargo is a financial services company that provides a number of trust, 

recordkeeping, administrative, and investment services to retirement plans covered by ERISA, as well as 

individual retirement accounts (“IRAs”).1

 Wells Fargo holds over $245 billion in IRA assets, $221 billion 

in institutional retirement plan assets, $261 billion in custody assets, and provides services for over 3.6 

million retirement plan participants, making Wells Fargo the 5th largest IRA provider and 6th largest 

institutional retirement plan recordkeeper (based on assets) in the United States.2 Wells Fargo also 

provides a broad array of clearing, brokerage, and other investment and transaction-related services to 

ERISA-covered plans and IRAs.3 As such, the proposed regulation significantly impacts not only Wells 

Fargo but also a great number of the customers to whom we provide financial services. 

 

1

 Any reference to an IRA should be taken to apply to Education Savings Accounts, Health Savings Accounts, and 

similar tax-deferred accounts subject to Internal Revenue Code §4975, but frequently not subject to ERISA. 

2

 Source: Cerulli Associates (based on 1Q10 assets), September 2010. Sources: PLANSPONSOR Magazine (based 

on sales), July 2010; and Cerulli Associates, July 2010. 

3

 Wells Fargo is a financial services company employing almost 280,000 team members. Its businesses include 

Wells Fargo Funds Management which serves as the investment adviser to the Wells Fargo Advantage Funds, 

with over $250 billion in assets under management across fourteen different share classes, each with its own 

arrangement for the payment of distribution costs and related shareholder services. Wells Fargo’s broker dealer 

subsidiaries include Wells Fargo Advisors, LLC (“WFA”), which administers almost $1 trillion in client assets 

through 15,100 full-service financial advisors in 1,100 branch offices in all 50 states and 5,900 licensed financial 

specialists in 6,610 retail bank branches in 39 states and HD Vest Financial Services with 5,100 independent 

advisors. WFA also includes First Clearing LLC which provides clearing services to 107 correspondent clients 

and WFA.
Page 2 of 9

In the proposed rule, the Department expands the interpretation of fiduciary status under ERISA 

§3(21)(A) by redefining the activities that constitute the provision of “investment advice for a fee or other 

compensation.” We understand that the Department hopes thereby to reach individuals and entities that

it believes should appropriately be held liable as fiduciaries, either for activities or guidance that

reasonably appears to the client to be fiduciary in nature or for activities that are in and of themselves 

fiduciary in scope. However, we believe that the proposed regulation as it is currently drafted may have 

specific impacts that the Department did not intend and we hope that our comments may provide 

valuable information to the Department as it considers the language of the proposed regulation. 

I. The Department should clarify that the exemption for certain general reports and statements 

includes reports and statements required by other laws or regulations. 

The proposed regulation includes in “investment advice” the provision of advice or an appraisal or 

fairness opinion concerning the value of securities or other property.4 It goes on to exclude from these 

activities “the preparation of a general report or statement that merely reflects the value of an investment 

of a plan or a participant or beneficiary, provided for purposes of compliance with the reporting and 

disclosure requirements of the Act [ERISA], the Internal Revenue Code, and the regulations, forms and 

schedules issued thereunder, unless such report involves assets for which there is not a generally 

recognized market and serves as a basis on which a plan may make distributions to plan participants and 

beneficiaries.”5

 While we applaud the Department for recognizing that plan and IRA custodians and 

trustees must include certain valuations on statements required under ERISA or the Internal Revenue 

Code6, the exclusion does not address the other typical ways in which valuations must be provided. 

Broker-dealers, broker-dealers who act as clearing firms, and banks have an independent requirement to

provide regular statements of accounts to their customers, beyond the requirements of ERISA or Internal 

Revenue Code. Generally, such statements are subject to other regulatory requirements regarding 

content and format and may be required more frequently. Customers are unlikely to notice or 

distinguish between a statement that may be required by the Internal Revenue Code or ERISA, as 

opposed to other law or regulation. In addition, such statements may serve to comply with the 

requirements of several regulators (for example, an end of year statement may function as a brokerdealer’s required statement and as a substitute Form 5498). Applying a different standard to general 

statements provided to customers depending on the nature of the law or regulation requiring such 

statement provides no additional protection to customers and puts an undue liability on statement 

providers who must provide the statements as a compliance matter. Therefore, we respectfully request 

that the exclusion for general reports or statements be expanded to include reports or statements required 

under other laws or regulations. 

II. The Department should remove the limitations on the exemption for general reports and 

statements. 

Although the proposed rule does broadly exclude general statements and reports required under ERISA 

or the Internal Revenue Code, it limits the exclusion to valuations that are determined on a “generally 

recognized market,” unless the valuation will not serve as the basis for a distribution. Since benefits due 

 

4

 Proposed §2510.3-21(c)(1)(i)(A)(1). 

5

 Proposed §2510.3-21(c)(2)(iii). 

6

 See EBSA Reg. §2520.103-5 and IRS Interpretive Letter EP:R:9 regarding valuation of IRA assets, dated

February 24, 1993. 
Page 3 of 9

to an individual from an IRA or individual account plan are determined by account balance, the 

statement for an IRA or individual account plan account may always serve as the basis for a distribution. 

Therefore, as written, any valuation that is not determined by a “generally recognized market” may fall 

out of the exclusion. However, there are a number of instances in which such a valuation might be 

required to be made for a statement. For instance, securities prices reflected on client statements may not 

reflect values derived from a “generally recognized market” when securities are thinly-traded or are 

illiquid. In those instances, broker-dealers and clearing firms typically rely on outside quotation services, 

computerized pricing services, or on methodology based on the most recent “bid-price” or last reported

transactions. For certain investments, the investment’s value is determined by a third party and merely 

reported on the statement. For instance, the values of many unregistered investment funds are 

determined by the fund manager. For limited partnership holdings or other hard-to-value assets, the 

client may also direct the bank or broker-dealer to accept valuations from a third party or an investment 

may be held at par. In some instances, statement providers do not serve as custodian or trustee for the 

IRA or ERISA plan. Even when the statement provider is also a custodian, most custodians would not 

view themselves as a fiduciary to the plan or IRA merely by providing a value received from a third 

party on a legally required statement. The imposition of fiduciary status will most likely be in conflict 

with the contractual arrangement between the parties. To compensate for the increased responsibility

that comes with fiduciary status, banks, broker-dealers, and other financial service providers will likely 

charge more for their services, which in the end increases the costs borne by plan participants and IRA 

owners. Additionally, providers may refuse to accept assets that are not clearly covered under the 

exclusion, leading to fewer investment choices for plan participants and IRA owners. For these reasons, 

we suggest that the limitations on this exemption should be removed. 

III. The Department should clarify that custodians and directed trustees for Employee Stock 

Ownership Plans holding non-publicly traded stock are not fiduciaries with respect to third party 

appraisals. 

For ESOPs holding employer stock that is not publicly traded, the proposed change will have a 

substantial impact on the availability of custodial and trust services. A custodian of an ESOP holding 

non-publicly traded stock would not expect to be a fiduciary by virtue of including a valuation for the 

stock on required statements, particularly since the valuation comes from another party in many cases. 

Plan trustees serving in a directed capacity have a heightened concern. At the encouragement of other

areas of the Department outside of the Office of Regulations and Interpretations, directed trustees will 

often review appraisals provided by an appraiser to verify if the appraisal meets certain minimum 

standards commonly used in the appraisal industry. Such standards are typically referred to as “Uniform 

Standards of Professional Appraisal Practice.” This type of review and verification is often considered by 

directed trustees as a requirement for taking “proper” direction under ERISA §403(a), as discussed in 

Field Assistance Bulletin 2004-03. However, under the proposed regulation, such activity could 

constitute investment advice, giving a directed trustee fiduciary and discretionary authority over the

appraisal, clearly contrary to the parties’ intentions. Such a broad interpretation could have a significant 

impact on the fee arrangements for such plans, as fees may increase to address enhanced responsibility. 

Many professional service providers may no longer be willing to become involved with plans holding 

non-publicly traded stock (or other non-publicly traded assets), which would mean that individuals, 

rather than professional service providers, may end up operating and administering such plans. The use 

of non-professional service providers may result in a significant detriment to plan participants. 
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If the verification of appraisal standards does constitute “investment advice” under the proposed 

regulation, a related question is whether an asset based fee would then be prohibited under ERISA 

§406(b), as the directed trustee’s “advice” over the value of the assets could affect the fee they collect. If 

so, the proposed changes would have a significant impact on one of the most common fee arrangements 

used by plan providers. So that plan providers, and the clients and participants they serve, have clarity 

around this issue, the Department should determine whether such verification of appraisal work would 

constitute investment advice under its proposed regulation, and if so, revise the regulation to remove

such a practice from being “investment advice” to avoid the detrimental effects noted above. 

IV. The Department should clarify what constitutes a “generally recognized market.” 

We would encourage the Department to provide additional guidance on what may constitute a 

“generally recognized market” for different types of assets. For example, most understand that there is a 

market for real estate, but the characteristics of that market are quite different from those of the market 

for stocks traded on the New York Stock Exchange. If the Department believes a “generally recognized 

market” requires the equivalent of a stock exchange, a large number of plan and IRA assets will be at 

issue, either because of liquidity issues or because the investment does not trade through an exchangetype market. Absent greater clarity and a broader exclusion for general statements and reports required 

by other regulatory authority, we are concerned that IRA custodians and other parties who provide 

investment account services for IRAs and ERISA-covered plans may substantially limit the types of 

investments that IRAs and ERISA-covered plans may hold in their accounts or substantially increase the

cost of holding such assets, which ultimately will negatively impact plan participants and IRA owners.

V. The Department should clarify that the valuation activity of certain funds is not the provision of

advice, an appraisal, or a fairness opinion. 

The Department should consider clarifying when advice, etc. is provided “to a plan, a plan fiduciary, or a 

plan participant or beneficiary” as required in proposed §2510.3-21 (c)(1)(i)(B). For example, many 

investment advisors provide valuations for funds they advise. Investments within registered investment 

companies are not considered plan assets, nor are investments in unregistered investment funds unless 

certain threshold levels of plan investors are met.7

 Such values are provided for the fund itself, and then 

passed on to the investors of the fund, including retirement plans. If such valuations were considered 

fiduciary activity under the proposed regulation, the regulation would circumvent specific ERISA 

statutory requirements which exclude such funds as plan assets. New concerns could arise over the 

manager’s compensation (typically expressed as a certain percentage of the funds' assets) if the manager 

is the party valuing the fund. The Department should clarify that these valuation activities of funds

which are not considered plan assets are not being provided to plans, etc. under paragraph (B) or 

otherwise not be considered investment advice. 

VI. The Department should make clear that “investment education” includes information about 

distributions. 

 

7

 ERISA §401(b)(1) and Labor Reg. §2510.3-101. In practice, our experience shows that most managers of 

unregistered funds maintain plan investors at a low level so as to not trigger the plan asset rules. 
Page 5 of 9

We applaud the Department’s clear exclusion from fiduciary activity for “investment education,” as 

described in 29 C.F.R. §2509.96-1(d), provided in connection with an individual account plan.8 However, 

in order to make sure individuals are getting the help they need, we encourage the Department to 

consider expanding the scope of information that would be considered “investment education” beyond 

the definition included in current regulations. Specifically, while 29 C.F.R. §2509.96-1(d) describes many 

important types of educational information, it does not clearly include certain information that we think 

is objective in nature and important for plan participants. For instance, current guidance clearly includes 

information regarding plan investment and contribution and retention of assets within the plan prior to 

retirement. However, most participants eventually reach retirement age or terminate employment and 

must make critical decisions about their plan balances. At that time, participants benefit from an 

objective explanation of all of their options under the plan, including whether to take a distribution, roll 

over the account to an IRA or subsequent employer’s plan, or to leave their account within the same plan. 

In that regard, the Department specifically requested comments on whether providing educational 

information to participants taking a distribution from a retirement plan should be treated as investment 

advice. For the reasons set forth herein, we strongly believe that this type of information should 

constitute investment education, which is consistent with the Department’s earlier guidance under 

Advisory Opinion 2005-23A. Generally, plan sponsors and plan administrators rely on financial 

institutions to help operate the retirement plans they sponsor. Part of the services provided typically 

include call centers that provide information to plan participants regarding the plans. Since plan 

administrators generally have an interest in ensuring participants are well educated, this information

often includes education about the distribution options available to participants. Upon terminating their 

employment, many participants call because they are unsure about their options and what the various 

financial/tax implications may be. Service provider call centers often provide critical information to such 

participants, including whether the participant can leave the funds in the plan, take a cash distribution, or 

rollover the funds to another retirement plan or IRA. As recognized by the Department,9

 rolling over the 

account balance is often the best option for participants as it preserves the tax-deferred nature of their 

retirement benefits. Our experience has shown that participants who are more informed of their 

distribution options are more likely to roll over their retirement benefits instead of cashing them out, 

which, as the Department has noted, is generally in the participants’ best interest. 

If this type of distribution education is elevated to the level of fiduciary investment advice, the additional 

responsibilities that would be imposed on financial institutions may cause financial institutions to stop 

providing this service to participants. This would create a void in participant education that would 

further exacerbate the retirement crisis that exists today. For these reasons, the proposal should not be 

extended to cover discussions about plan distributions. 

VII. The Department should expand the class of persons who may receive “investment education.” 

We also encourage the Department to consider expanding the class of persons who may receive nonfiduciary investment education. IRA owners, for instance, would benefit from the same sorts of 

investment education materials described in the current guidance. There does not seem to be any reason 

why the types of educational information listed in 29 C.F.R. §2590.96-1(d) should not be considered 

investment advice when provided to a participant in an individual account plan, but could be investment 

 

8

 Proposed §2510.3-21(c)(2)(ii)(A). 

9

 See Field Assistance Bulletin 2004-2. 
Page 6 of 9

advice if provided to an IRA owner. To the extent that it is unclear whether information is included in 

the “investment education” exclusion, plan and IRA service providers may restrict the information 

provided to plan participants, plan fiduciaries, and IRA owners, to the detriment of all of these parties. 

VIII. The Department should expand the exclusion for marketing and objective information.

As part of the proposed regulation, the Department has excluded from fiduciary activity the provision of 

general financial information and data used to assist a plan fiduciary’s selection or monitoring of 

investments, as well as certain marketing and platform activity, if certain requirements are met.10 We 

agree that these activities should not be considered fiduciary in nature and respectfully suggest that the 

exclusion should not be limited to individual account plans. These activities are just as important to other 

types of retirement plans and IRAs. In order to make informed decisions, plan fiduciaries and IRA 

owners and beneficiaries need information. Expansion of the exclusion to other types of plans and 

accounts will enhance the types of information available to these plans and accounts, while still meeting 

the Department’s objective of making sure that the recipient of information understands the role of the 

provider. 

For example, once a participant has selected an IRA provider, the participant may ask the IRA provider

about investment options. Depending upon the financial institution servicing the IRA, the participant

may have various options – certificates of deposit of varying rates and terms, savings accounts, stocks, 

bonds, mutual funds, and other investments. An IRA owner may face a bewildering number of choices if 

the universe of possible investments is not somehow reduced. For instance, IRA owners may choose 

from among over 8,000 mutual funds11 for investment of an IRA’s assets. Some IRA providers may 

attempt to explain the investment options available to individuals. Brokers in particular may discuss

with the new IRA owner what their objectives are, time horizons, risk tolerance, etc. to get some idea of 

which investments could be suitable for the IRA owner, to meet their legal requirement to offer 

investments that are suitable for their client. If IRA providers are considered to be giving investment 

advice through this practice, it would be a radical departure from the current state of affairs and could 

require significant changes in fee structures, as in general IRA providers or their affiliates often earn some 

compensation from the investments selected by the IRA owner. If IRA providers are unable to give this

type of guidance due to prohibited transaction concerns if they are fiduciaries, they may not give any at 

all, further reducing information available to IRA owners on their investments, leading to poorer 

returns.12 Or they may have to change to an investment advisor model where participants are charged a 

flat basis point fee instead of commissions or other compensation. While such an arrangement is not 

necessarily better or worse than the alternatives, IRA owners will end up with fewer choices – either an 

investment advisory model or no assistance at all – and many would likely benefit from something in 

between but which will be much less available. 

 

10 Proposed §2510.3-21(c)(2)(ii)(B)-(C). 

11 As of year end 2009, 2010 Investment Company Factbook. 

12 The Department has previously noted the benefit to participants of having adequate investment information 

(see the supplementary information to the participant disclosure final regulation at 75 Fed. Reg. 64910), and the 

benefit of having retirement assets invested appropriately (see the supplementary information to the qualified 

default investment alternative regulation at 72 Fed. Reg. 60452). 
Page 7 of 9

IX. The Department should clarify the limitation in Proposed §2510.3-21 (c)(2)(i). 

In section (c)(2)(i) of the proposed regulation, a person is not considered to be giving investment advice if 

the recipient knows or should know the person is acting as a buyer/seller of the property in question. The 

Department should clarify that this exception is available in situations where the recipient knows or 

should know that the person has an interest, regardless of the specific transaction or whether the interest 

is “adverse.” 

 

For example, as discussed previously, participants receiving distributions and IRA owners choosing 

investments from a financial institution should know that the financial institution or its affiliates may 

benefit from the participant/IRA owner selecting the IRA/investment associated with the financial 

institution. An IRA owner selecting a mutual fund from a distributor of that fund should know that the 

distributor or an affiliate may gain financially from the transaction, even though the transaction may not 

be considered a buyer/seller type of transaction as the proposed regulation contemplates. A similar 

situation may arise from a manager valuing an unregistered investment fund that “sells” the fund to a 

plan/IRA. Furthermore, in these and many other situations, the interest is not necessarily “adverse.”

In these situations, even though the transaction is not a quintessential buyer/seller transaction, under the 

facts and circumstances the recipient of any “advice” should be able to determine that the person has a 

financial interest in the transaction and should be covered by the limitation in (c)(2)(i). The Department 

should delete the requirement to be “adverse” as in many transactions, the financial interest is not 

necessarily adverse. The Department could also consider allowing the person to give a disclosure of 

some kind similar to those in (c)(2)(ii)(B) & (C) so that the parties are clear that one is not intending to 

provide fiduciary investment advice, although we suggest that the requirement of written disclosure may 

not be appropriate in all instances. Since most service providers will seek to satisfy (c)(2)(i) in instances 

where they believe they do not act as a fiduciary, we request that the Department thoughtfully consider 

and clarify the information required for an appropriate disclosure under (c)(2)(i). 

X. The Department should make clear that certain recordkeeping practices fall within the exceptions 

in Proposed §2510.3-21 (c)(2)(ii)(B) and (C).

Recordkeepers of individual account plans frequently provide assistance to plan fiduciaries selecting 

investment options. For example, recordkeepers may provide information to fiduciaries regarding the 

performance of investment options, investment style, etc. when the fiduciary is reviewing the investment 

options in its plan. A recordkeeper may also provide sample fund line-ups to fiduciaries in order to give 

plan fiduciaries introductory information regarding cost and other factors. These types of practices are 

common in the industry, and provide plan fiduciaries with critical information, but are not intended by 

either party to constitute investment advice for a fee. The Department should clarify that such practices 

are not considered investment advice under its proposal. For example, paragraph (B) requires that 

making available a platform not take into account “the individualized needs of the plan,” and (C) cross 

references back to (B). However, both of the practices mentioned above may be viewed as taking into 

account the plan’s individualized needs. For example, if a plan fiduciary wants to replace an 

international fund, recordkeepers will provide the fiduciary with international fund information, which 

would seem to take into account the plan’s individualized needs. A sample fund line-up could have the

same concern. Given that the exceptions each provide for a disclosure noting impartial investment 

advice is not being provided, the plan fiduciary should already be aware that the assistance is not meant 
Page 8 of 9

to be investment advice. For these reasons, the Department should clarify that these exceptions apply to 

the general recordkeeping practices of providing general information to plan fiduciaries. 

XI. The Department should clarify that a mutual understanding over the advice should be required in 

order to be considered “investment advice.” 

Section (c)(1)(i)(D) as proposed allows all statements made to be considered “advice” if the advice may be 

considered in connection with the investment or management decisions over plan assets. In addition, the 

Department has removed the requirement that the understanding between the parties be mutual; 

presumably under the proposal, only the opinion of the recipient is relevant in determining whether 

certain statements should be construed as advice. 

“May be considered” is an extremely broad term that could perceivably cover any statement made, no 

matter how informal. Further, without a mutual understanding, individuals and entities could easily 

become fiduciaries unknowingly. Given the heightened standard of care placed on fiduciaries, the 

Department should consider whether it is fair and equitable to put individuals in such a position without 

their knowledge. For example, a financial entity may hire a real estate appraiser or broker to appraise 

various properties for the financial institution’s various accounts. Some accounts could be subject to the 

proposed regulation while others (e.g., personal trust accounts) may not. The appraiser may never know 

which accounts, if any, are subject to the Department’s proposal; he or she may just have a list of 

properties to appraise for the financial institution, and concerns over privacy may limit the financial 

institution’s disclosures to the appraiser. Presumably, under the proposal, the appraiser would become a 

fiduciary providing investment advice for a fee, and may not have any idea of his or her heightened 

responsibility. A similar concern could arise with a manager of an unregistered investment fund where

the manager values the fund; such a manager may not know the exact identity of underlying investors, 

such as where the fund is comprised of other commingled funds. Without a mutual understanding, the 

Department should consider whether it is equitable to impose fiduciary status on individuals without 

their knowledge, especially when altering long-standing practice. 

For these reasons, the Department should require the understanding between the parties be mutual, and 

require a higher standard than just allowing the advice to “may be considered;” better would be to have a 

materiality threshold of some sort along with the mutual understanding. 

XII. The Department should limit affiliates which become fiduciaries “indirectly” under Proposed 

§2510.3-21 (c)(1)(ii)

The proposed regulation contains categories of individuals and entities that may become fiduciaries 

indirectly under paragraph (c)(ii), giving the example of “through or together with any affiliate.” While it 

is acceptable that the individual or entity giving advice may become a discretionary fiduciary because of 

that, “indirectly” sweeps much more broadly. For example, many financial institutions have a number of 

investment advisors within the meaning of section 202(a)(11) of the Advisors Act. Under the proposed 

regulation as written, all of them would meet this requirement even though they had nothing to do with

a particular plan. Directed trustees would also be included under section (c)(1)(ii)(B)13 yet would not be 

offering any advice under what are generally understood to be the duties of a directed trustee. There is 

 

13 The Department noted this in Field Assistance Bulletin 2004-3 that directed trustees are fiduciaries under 

ERISA §3(21)(A)(iii). 
Page 9 of 9

no apparent rationale for including affiliates this broadly – while the entity offering advice may become a 

fiduciary because of that advice, related entities should not be viewed as offering the advice just because 

they are affiliated. For these reasons, “indirectly” should be removed from this requirement. Indeed, the 

Department should consider removing paragraphs (B) and (C) altogether as entities that meet those 

definitions would also come under (A) or (D) if they are offering investment advice; what (B) and (C) add 

is unclear in the context of investment advice. 

We hope these comments have been helpful and we hope that the Department will consider them while 

determining the proposed regulation’s scope and form. 

Best regards, 

Joseph Ready 

Executive Vice President 

Wells Fargo Institutional Retirement and Trust